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Automotive Refinish: Profitability in the Paint Shop

With tighter profit margins today, we need to track our paint and materials usage and a host of other numbers. After all, if you can’t measure it,
you can’t manage it.

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Carl Wilson has been painting for nearly 30 years, with formal training from the GM Training Center, ASE, I-CAR and multiple product and color courses. He currently works as a trainer/consultant for Hi-Line Distributors in Oahu, Hawaii. He can be reached at [email protected]

A time long ago, in a not-too-distant land, profit margins in a body shop were such that body men and painters were making a living fixing cars as owner/operators with no conscious thought of gross profit as a percentage of sales, let alone paint and material profitability. I’m not suggesting they were sloppy and wasteful, just that the margins were fatter and there was more room for error. As long as they were fixing cars, they were making money. Simple. But that was then, and this is now.

Today, we need to be conscious of such things and more. I suspect most of us know we’re after a gross sales mix in the neighborhood of 30 percent body labor, 20 percent refinish labor, 10 percent paint sales, 35 percent parts and 5 percent sublet. We’re aiming to spend in the neighborhood of 7 percent for our paint and materials, broken down to 5 percent paint purchases and 2 percent allied products. Different groups, councils and organizations may have slightly different numbers and may or may not load discounts into the analysis. They also may or may not take material inventory into consideration, but the equation to determine the gross profit on paint and material is the same: Subtract the amount you spent on paint and materials from the amount of paint and materials you sold, then divide the difference by the amount sold. The numbers represented here do not factor in discounts or inventory and give us a gross profit of 30 percent on paint and materials, which is a safe, middle-of-the-road number depending on the market. I know some will dispute the non-discounted number; that’s perfectly fine, as this is simply an example and our discussion here is focused on improving the number regardless of where it’s at.

We have so many moving parts and partners to orchestrate and coordinate that we can’t afford for things to be out of time, or we pay the price with a late product which – depending on our negotiations with our insurance partners – may affect our rate and further drive down our profitability. Not many shops are so well-regulated that they run like Swiss watches, and even the ones that seemingly are running well have opportunity to improve. While we must pay attention to the numbers to know where we’re at, we can get off in the weeds pretty easily.

 

The simple formula that increased paint profitability yesterday is the same simple formula that works today: Do more with less, and get paid for what you do. In other words, process and paint more cars with less material, and bill for what is done. As simple as that sounds, it doesn’t mean it’s easy – not in its entirety anyway – but there are amazingly easy pieces to it.

Before we drill down in the paint shop, let’s pull back and consider a major factor that influences the profitability of the entire enterprise. If this one item is out of whack, then our overall profitability is affected, and we can’t fix it in the paint shop regardless of what we do. I’m talking about the estimate and the aforementioned 30-20-10 mix.

Estimate/Repair Order

If we’re not selling enough refinish labor, then we’re donating the labor. That directly affects our paint sales, as the reimbursement rate is tied to refinish labor. I realize this is news to no one, but my point is that we can never achieve paint and material profitability if we’re donating both the labor and material necessary to do the repair correctly, regardless of any paint discount we may have.

I recently heard the owner of a small fledgling shop say, “I don’t care about labor – these guys are all on commission!” Whaa…? Was he putting me on? OK, it’s obvious he doesn’t understand the relationship between labor and material, but I reckon you do and you strive for a more thorough estimate…right?

Between the jobber and paint manufacturer, there are estimating resources available to further educate estimators on billable operations, which may be being overlooked. The estimating system you use likely has resources as well. Online estimate scrubbing services can review uploaded estimates and flag every missed opportunity based on the nature of the repair, effectively acting as an audit.

 

If we don’t sell enough refinish labor, our paint and materials profit will suffer because we’ll still be spending the same amount on paint but donating it instead of billing for it. We wouldn’t purchase replacement sheet metal parts and not submit the invoice, would we? Of course not! So, if overcoming a cap is necessary, it may be helpful to think of paint as a part and submit an invoice for it. All the major paint manufacturers have the ability to mix their products on a scale, assign it to a repair order number and then print off an invoice showing all the liquid items that were put on the vehicle.

While we’re talking about paint and materials, another contributing factor that can throw our number off is everything else we purchase from the jobber that isn’t paint or allied products. Tools, equipment, personal protective equipment, booth filters and air lines are not part of paint and materials and should be coded differently on the general ledger.

But talk of such things is getting outside of my rudimentary understanding. I’m a simple painter, so let’s get over to the paint shop and see where we can save some material.

Re-repairs

To restate the obvious, “You can never paint anything fast enough a second time to be profitable.” “Do it right the first time” sounds so simple, yet we somehow wind up with a redo from time to time. And presuming our estimates are up to snuff, nothing (with the exception of theft) erodes paint profitability more than re-paints. Let’s look at the monetary impact of a single redo with the premise that an average RO is valued at $2,500:

  • Paint labor: $520
  • P&M: $182
  • Lost opportunity of new job: $2,500

This gives us an average cost of $3,202 per re-paint – and this doesn’t include the energy to run the booth another cycle or the painter’s aggravation factor, which hinders his usual efficiency. You may say that number is high, as your painters are on commission and you don’t pay any labor for a repaint. Really? Do I understand then that a repaint due to shop damage is thrust upon the paint shop with no compensation? Hmmm, OK – I say count it anyway. With one redo a week, the number is over $160,000 a year. At just one a month, it’s in the neighborhood of $38,000.

How much are repaints costing you? Do you know? Do you measure it? Might I suggest a job/redo tracker-board to make an accurate determination of the percentage of repaints? Simply measuring it will likely cause an increase in productivity and a reduction in repaints, as well as allowing us to identify any areas for improvement. It’s unlikely we’ll ever eliminate every redo, but we can reduce the self-inflicted ones substantially.

Measuring Material Consumption

Let’s presume that our estimates are great and we don’t have an epidemic of repaints. Now we drill down further and take a look at how much material we’re putting on each vehicle. As long as the scale/computer is configured to require an RO number to complete the mix, then we have a metric we can measure: the ounces of color or clear that are being used per refinish hour.

Your paint manufacturer likely has an ideal number that falls right between too little and too much material. Too much material is an obvious waste, but too little material may mean transparent panels or inadequate film build – which may lead to a repaint. Regardless, there is a number to compare to actual consumption, but we have to measure it accurately to make that comparison. Here are a few things to look at if the ounce-per-hour number is askew.

Color Coat

We can be fairly close in our estimate of the quantity of color required to paint a job. The question is: Is that how much we’re using, and if not, why not?

The first part of the answer brings up another question: How did we choose this formula to mix? Color chips? Color camera? Color library? Simple guess? Unless we’re guessing, then something compelled us to make the choice we did. If we guessed or chose poorly, we may have mixed up a full load of the wrong color. Now what? It may or may not be tintable, and if not, we have to mix another load. Oh I know, we’re going to use that first mixup later on something else – OK. In that scenario, we would see a spike in color usage, but clear usage would be in line. Or perhaps we made the effort to tint the color, and after fighting it for too long, we started to suffer from “color fatigue” and convinced ourselves the color was good – only to really see the mismatch after it was finished and put together, necessitating a repaint. In this case, we would see an increase in both color and clear.

If the color is an unknown to us, and we don’t have the tools to guide us to a good choice, then we should mix no more than is required for a sprayout card. Now we have something to start guiding us, and we have just grown our color library by another sprayout.

Preparation Considerations

We can reduce the amount of material we use if we raise the bar on our preparation, specifically the sanding of our primer (I’m using the term “primer” generically here). By finishing off our primer with a paintable scratch signature such as 600 grit, we can eliminate the use of a sealer in most cases and paint right over the primer. Refer to the technical data sheets of the system you’re using to make sure it allows this.

 

You cannot paint color directly over the e-coat of new parts, but some paint systems have a sealer that will adhere to properly cleaned, unsanded e-coat, eliminating the material and labor otherwise used in the sanding operation. Again, refer to the technical data.

Painter-Donated Material

Mixing all products over the scale to an RO number isn’t a new concept, but I’m still amazed at the number of paint shop personnel who will mix primers, sealers and clears in a graduated cup. The digital scale has revealed to us the inherent inaccuracy of the cup and, consequentially, the ratio. Is it close enough for the components to do what they’re supposed to do? Of course! We’ve used cups and measuring sticks for decades. However, there are two advantages to mixing across a scale, the first being that it gives us a greater degree of accuracy and therefore less waste. The second advantage is it allows us to create an accurate list of the products required to complete the repair and generate an invoice for them if necessary – the products that are put on the vehicle and leave with it, just like any hard part.

Application

Presuming we have a workable color, are we putting on the correct amount? Are we over-covering or putting on “one more to be sure,” as many a painter will? There is no benefit to putting on more than is necessary, it just costs more. And if we’re measuring it, we’ll see it.

What air pressure are we spraying at? There is a recommended range from the paint manufacturer to ensure an acceptable, blendable color match. The high end of the range will naturally have more overspray, or less transfer efficiency. Using the lower end of the recommended range will result in less material consumption. This applies to the application of the clearcoat, too.

Another application technique that will result in consuming less is to reduce the number of overlap zones as you paint the side of a car. Every overlap is just that – an overlap. There is more product applied in the overlap than on the rest of the panel…you know, those areas that are prone to sags and runs?

Painting Parts Off the Vehicle

Not every painter is comfortable with painting three-stage colors or even silvers, except by traditionally jambing and hanging all the sheet metal. However, painting parts off the vehicle whenever possible saves in a number of areas. It reduces the amount of gun cleanings, which cuts down on cleaning solvent, disposable paint cups, labor and hazmat accumulation of cleaning solvent. It also saves on masking material. Also, less paint is generally consumed when we paint inside and outside at the same time.

Additionally, when parts are painted off the vehicle, we can load two or more cars at a time in the booth, which also improves our sealer and clear application efficiency.

Summary

As long as we a) measure what we’re doing against established benchmarks to identify areas for improvement and then make those improvements, b) have meaningful procedures to obtain the clearly defined results we’re after, and c) do it in a timely manner that satisfies our partners and customers, then we’ll be making money. Simple.

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